Going For Bust Leads To Boom For Japan

The world’s third largest economy is booming and bringing opportunities for investors after decades of poor equity performance, says one leading investment expert.

Japan has spent years with a deflating economy but new Prime Minister Shinzo Abe came to office by vowing to bring inflation and prosperity to the country.

His fiscal policies were termed ‘Abenomics’ and investment analysts immediately spotted opportunities for people to boost their portfolios with Japanese stocks and shares.

William Davies, who is head of Global Equities at Threadneedle Investments, says Abenomics has more depth than simply quantitative easing.

He said: “The Japanese have introduced corporate and investment tax cuts and pushed up defence spending.

Secrets of Abenomics

“The country has also unleashed a strategy for growth which covers privatisation and free trade, employment reform, healthcare research and deregulation.”

He says this has resulted in a massive move in the outlook for companies in Japan and investors are now rushing to identify the best positioned companies who will benefit most from these policy changes.

Japanese equities have a positive future though Mr Davies believes that the market has been stunned by the scale of planned changes.

However, not everyone is so pleased by the booming Japanese economy because one of its main turning points depends on pushing down the value of the yen.

This move has angered not only neighbours in the Asia Pacific, but also the US since the move makes Japanese exports cheaper and imports dearer.

Analysts say the move has made the stocks for big exporters such as Makita and Toyota more attractive – especially since many of the top firms will benefit from the improving economy in the US.

Attractive to investors

Mr Davies says he also likes the Japanese financial and property sectors, especially REITs like Activia Properties which will see a rise in asset values and rents.

Demand is increasing in Japan for energy-efficient and earthquake-proof new housing which is helping to make homebuilder Sekisui Chemical more successful.

In addition, he says, banks have traditionally been big lenders to property developers and their profits should improve as the economy picks up – with Nomura and Aozora Bank doing particularly well.

With a burgeoning domestic economy, Mr Davies is pointing to brewer Asahi and retailer Aeon as the winners from an economy enjoying inflation since they will be able to increase their prices for the first time in years.

Mr Davies said: “It’s been a long time since Japan was attractive to investors but with Abenomics we are seeing a change of fortunes and the first effects have been seen by the country’s equity markets.”

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